SARS can legally charge firms with an audit fee for extra resources

02 April 2019Consultancy.co.za

Based on judicial rulings on a recent case, Senior Tax Attorney at Tax Consulting SA Jean du Toit has illutarted how the South African Revenue Services (SARS) is well within its right to charge a firm for any additional resources that it might have to deploy during an audit procedure.

Du Toit’s assessment is based on a Supreme Court of Appeal cased between Purlish Holdings and The Commissioner for SARS, wherein the firm declared no income and subsequently claimed tax returns despite having generated income for the stated period and having paid provisional income tax.

SARS imposed additional penalties on the firm on the grounds that it was forced to deploy additional man-power and resources due to faulty claims from the firm, an imposition that Purlish contested. The court concluded that the liability faced by SARS was financially substantial.

According to du Toit, the case presented a number of interesting points. “The intriguing part of this judgment is the fact that the SCA confirmed that there is a legislative measure that can be invoked to penalise taxpayers who wastefully consume SARS’ time and resources,” he said.

“Of course, one can understand the rationale for a mechanism that would deter such behaviour, as there are undoubtedly taxpayers who take chances when completing their returns, only to plead ignorance when an audit exposes the fact that this was not done correctly or truthfully,” he added.

The analysis comes at a time when the SARS is clamping down on all tax-related malpractice. Since last year, the entity has been publicly calling out tax defaulters in order to serve as a deterrent to those looking to avoid the newly hiked tax rates across the country. According to du Toit, giving SARS this authority is a sound measure.

“Taxpayers should welcome this decision, as our tax system would be brought to its knees if it becomes necessary for SARS to audit each and every taxpayer,” he said. His claims are particularly pertinent in light of the fact that the agency has been struggling with depleting resources.